Quantitative Trading Analysis Documentation
Setup Environment
The environment setup ensures that all necessary packages for quantitative trading analysis are installed and loaded. This includes packages for data manipulation, financial analysis, plotting, and more.
Data Handling and Analysis
Exploratory Data Analysis (EDA)
Dow Jones and Nasdaq Closing Prices
This plot shows the closing prices of the Dow Jones Industrial Average (DJIA) and Nasdaq Composite Index from 2000 to 2024. The blue line represents DJIA, and the red line represents Nasdaq.
Histogram of Daily Returns
The histogram displays the distribution of daily returns for both DJIA and Nasdaq. The blue bars represent DJIA returns, and the red bars represent Nasdaq returns.
Descriptive Statistics for Closing Prices
- Dow Jones Industrial Average (DJIA)
- Minimum: 72.06
- 1st Quartile: 1050.29
- Median: 13469.16
- Mean: 13197.92
- 3rd Quartile: 18230.45
- Maximum: 28539.45
- Nasdaq Composite Index (IXIC)
- Minimum: 1114.11
- 1st Quartile: 1849.49
- Median: 3574.54
- Mean: 3642.76
- 3rd Quartile: 5297.25
- Maximum: 8837.45
Descriptive Statistics for Daily Returns
- DJIA Daily Returns
- Minimum: -0.0994
- 1st Quartile: -0.0032
- Median: 0.0003
- Mean: 0.0004
- 3rd Quartile: 0.0037
- Maximum: 0.1122
- Nasdaq Daily Returns
- Minimum: -0.1018
- 1st Quartile: -0.0041
- Median: 0.0006
- Mean: 0.0005
- 3rd Quartile: 0.0052
- Maximum: 0.1074
Annual Returns of Dow Jones and Nasdaq
This scatter plot illustrates the annual returns of DJIA and Nasdaq. Each point represents the annual return for a given year, with blue points for DJIA and red points for Nasdaq.
Monthly Returns of Dow Jones and Nasdaq
This scatter plot shows the monthly returns of DJIA and Nasdaq, with blue points representing DJIA and red points representing Nasdaq.
Volatility Analysis
Rolling 30-Day Volatility
The rolling 30-day volatility plot highlights the annualized volatility of DJIA (blue line) and Nasdaq (red line) over time.
Correlation Analysis
Rolling 30-Day Correlation between Dow Jones and Nasdaq Returns
This plot presents the rolling 30-day correlation between the daily returns of DJIA and Nasdaq.
Correlation between Dow Jones and Nasdaq Returns
- Correlation: 0.679
Cumulative Returns
Cumulative Overnight and Intraday Returns for Nasdaq and Dow Jones
The plot shows the cumulative overnight and intraday returns for both Nasdaq and DJIA. The different colors represent the various return types for each index.
- Final Cumulative Returns for Dow Jones:
- Overnight Return: 1.304
- Intraday Return: 1.874
- Final Cumulative Returns for Nasdaq:
- Overnight Return: 2.504
- Intraday Return: 2.842
Moving Averages
Dow Jones with 50 and 200-Day Moving Averages
This plot shows the DJIA closing prices along with the 50-day (blue) and 200-day (red) moving averages.
Nasdaq with 50 and 200-Day Moving Averages
This plot shows the Nasdaq closing prices along with the 50-day (blue) and 200-day (red) moving averages.
Heatmap of Returns Correlations
This heatmap visualizes the correlations between the returns of DJIA and Nasdaq over different periods (daily, weekly, monthly).
Seasonal Analysis
Histogram of Monthly Returns for NASDAQ Composite
This histogram shows the distribution of monthly returns for the NASDAQ Composite index, categorized by month.
Density Plot of Quarterly Returns for NASDAQ Composite
This density plot illustrates the distribution of quarterly returns for the NASDAQ Composite index.
Average Monthly Returns for NASDAQ Composite
This bar plot displays the average monthly returns for the NASDAQ Composite index.
Median Monthly Returns for NASDAQ Composite
This bar plot shows the median monthly returns for the NASDAQ Composite index.
Performance Based on Sentiment
VIX Index and Market Sentiment
This plot depicts the VIX index and corresponding market sentiment scores over time, with different sentiment zones shaded.
Performance by Sentiment Zone
- Performance for Dow Jones during various sentiment
zones:
- Very Low:
- Overnight Return: 0.045
- Intraday Return: 0.056
- Total Return: 0.103
- Low:
- Overnight Return: 0.038
- Intraday Return: 0.041
- Total Return: 0.079
- Neutral:
- Overnight Return: 0.021
- Intraday Return: 0.026
- Total Return: 0.047
- High:
- Overnight Return: 0.011
- Intraday Return: 0.012
- Total Return: 0.023
- Very High:
- Overnight Return: -0.007
- Intraday Return: -0.005
- Total Return: -0.012
- Very Low:
Performance Summary for Nasdaq
This bar plot summarizes the average and median returns for the NASDAQ Composite index across different sentiment zones.
General Correlation
General Correlation between Nasdaq and Dow Jones
- Correlation: 0.89
Interactive Analysis with Shiny
The Shiny application includes interactive plots for deeper analysis:
Drawdowns of Nasdaq and Dow Jones
This interactive plot shows the drawdowns for both Nasdaq and Dow Jones indices.
Relative Performance of Nasdaq vs. Dow Jones
This interactive dygraph illustrates the relative performance of the Nasdaq index compared to the Dow Jones index.
Rolling Sharpe Ratio Over Time
This interactive plot presents the rolling Sharpe ratios for both Nasdaq and Dow Jones.
Volatility (VIX) vs. Market Indices
This interactive plot compares the VIX index with the market indices (Nasdaq and Dow Jones), normalized to a common scale for better comparison.
Conclusion
This documentation covers the essential steps and visualizations for a comprehensive quantitative trading analysis using R. The analysis includes data handling, exploratory data analysis, volatility and correlation analysis, cumulative returns, moving averages, seasonal returns, sentiment-based performance, and interactive analysis using Shiny.